Short-End Yields Higher Ahead Of Wages Data

The RBA's Feb meeting minutes added little new to the policy debate (there was confirmation that a pause in tightening was not discussed earlier this month, while a 50bp hike was), NZGB short-end weakness, fueled by NZ Treasury comments on RBNZ policy, was the dominant driver. Aussie rate futures closed YM -2.0 and XM -0.5, comfortably off their respective session bases. YM registered fresh intraday lows for '23 in the process, representing a 60bp+ sell-off from pre-RBA meeting levels. Cash ACGBs closed 1-3bp higher in yield with the 3/10 curve 2bp flatter.

• AU/U.S. 10-year yield differential closed at -4bp, 1bp higher than Friday’s close of -5bp.
• Swap flows added to the weakness with EFPs wider, led by the 3-year.
• Bills closed 4-5bp softer across the strip, also off session lows.
• RBA-dated OIS nudged higher to a 95% chance of a 25bp hike in March and firmed 3-4bp for meetings out to November. Terminal rate expectations moved higher to ~4.30%.
• Looking ahead, the resumption of cash Tsy trading after yesterday's holiday may provide fresh impetus, but the Aussie market will likely trade tentatively ahead of tomorrow’s Q4 WPI. With Q4 CPI signalling a shift in inflationary pressures from goods to services and wages closely linked to services inflation, wage data has quickly become a headline event on the local calendar.